Expat returning to Oz - tax implications

All,

Possibly a complex Tax quesion but any advice is greatfully received. Discussing with accountant and doing research myself at the moment.

Rather than waffling here are the concise facts.

I have Australian PR, married.
Currently expat in Malaysia. Net income $200+.
3 IP's in Oz, Total Value = $High, Debt = $Low. LVR = 25%.
Variable interest rates.
$90,000 cummulative IP losses over the last 5 years.
IP's will give $15,000 positive cashflow for 09-10 tax year.
Job offer in Oz at $200+ (plus super & fringe benefits)
Job start in Jan 2010, thus 09-10 wage income will be about $100K+

Question - What tax will I pay for 09-10 year on my new earning in Oz ? Will my Oz income from Jan be taxed on standard rates irrespective of my Malaysian income from the first part of the year ? Does my Malaysian income for Q1 & Q2 09-10 have any affect on my OZ tax status for 09-10 ?

GunnerGuy.

 

The tax a person pays will be based on their total taxable income. A persons taxable income is their Australian employment income, plus any foreign income, plus rental property income, plus any other income, less deductions, less any tax losses that they are able to apply.

If a person pays foreign income tax, they will also likely get an offset for that tax paid up to but not exceeding the Australian tax they would have paid if it was Australian income (this basically prevents double taxation).

An employer will deduct tax based on the amount of salary or wages paid and whether that person is an Australia resident for tax purposes. If a person basically moves from one country to another with no intention of going back, then they normal become a tax resident at that time. Of course there are many other factors that impact on a persons residency status, so professional advice should be sought.

A good way (although crude) to estimate your tax bill for the year is to add up all your expected income, take off your expected tax deductions and applicable losses to give you your taxable income, work out the tax + medicare on that income and tax off any foreign income tax paid (once converted to Australian dollars of course) and the tax withheld from your salary and wages and viola - if the number is a positive, that will be your tax bill, if negative its a refund.

The above is a good way - but not a simple way. A good tax accountant should be able to do this with a reasonable degree of accuracy. I also believe there maybe some spreadsheets in the forums somewhere that maybe able help the people who have the time and knowledge to do it themselves.

Remember tax planning is something that should be done now - early in the financial year - not in the last week before 30 June!

 

I assume by your carry-forward rental losses that you have been filing a tax return in Australia on rental income as a non-resident for tax purposes.

I assume that you are intending to file a tax return as a resident from the time you enter Australia.

You will need to get advice on how the Australian double tax agreement with Malaysia operates if you have any presence/relative/assets left in Malaysia.

You can be a tax resident of Australia for part of a year - get specific advice, since you will have part-year thresholds and rates to work out.

Once you are treated as a tax resident, any Malaysian income earned from that date will be taxed here with a credit allowed against any tax paid on that income in Malaysia. If your salary has ceased, then this will only be relevant for investments (and their CGT when sold) remaining overseas - and perhaps any ETP from your last employer.

You will be treated for CGT as if you have just acquired any assets you continue to hold, but not your IPs here, unless you made an election at the time you became a non-resident.

As regards your salary packaging in Australia, be aware that any fringe benefits (other than exempt benefits) is exempt income, and will erode your carry-forward losses before they can be applied against your other income.

If you still have carry-forward losses such that you have a nil tax liability, you might lose your foreign tax credits, as well as any low income rebate etc.

Changing residency takes a lot of tax planning, so make sure you get competent advice before you make the move. This is way beyond the scope of your average "$80 per return" Tax Agent so expect to pay for good advice.

Cheers,

Rob

 

Returning Expat

Thanks for the advice guys.

I plan to return August/September/October next year, ie. just in to the new tax year. I know there are significant tax implications for my return to Australia and thus I am starting to investgate these implications.

I have my current accountant (been with him 10 years) looking in to the issue and I am getting advice from two recommended financial advisors with experience in these areas.

I have 12 months to analyse my global assets/incomes and act accordingly so that by the new tax year in July 2010 I should have everything set up and sorted.

Again thanks guys.

GunnerGuy

 

Cut to the chase http://www.bantacs.com.au/booklets/Overseas_Booklet.pdf